Have passive rentiers replaced the working rich at the top of the U.S. income distribution? Using administrative data linking 15 million firms to their owners, this paper shows that private business owners who actively manage their firms are key for top income inequality. Private business income accounts for most of the rise of top incomes since 2000, and the majority of top earners receive private business income — most of which accrues to active owner-managers of mid-market firms in relatively skill-intensive and unconcentrated industries. Profit falls substantially after premature owner deaths. Top-owned firms are twice as profitable per worker as other firms despite similar risk, and rising profitability without rising scale explains most of their profit growth.

I’ll begin with what the court of appeals got right. First, the court did not read a “disease” requirement into the “structure or function” route to a medical expense deduction. Second, the court did not summarily reason that ARTs are unrelated to a “function of the body.” The court of appeals thus avoided two errors that plagued the earlier Magdalin v. Comm’r case (a Tax Court memorandum opinion summarily affirmed by the First Circuit, and which I’ve written about here).

Unfortunately, the court of appeals got just about everything else wrong.

An Illinois lawyer who claimed his license suspension made it impossible to find appropriate work isn’t entitled to discharge student debt totaling more than $500,000, a Chicago federal judge has ruled.

U.S. District Judge Rebecca Pallmeyer ruled late last month against lawyer Donald Rosen, who was suspended from practice for at least three years after allegedly misappropriating over $85,000 in client funds, the Cook County Record reports.

Pallmeyer affirmed a bankruptcy court’s ruling against Rosen, who had paid only about $11,000 in student debt over 37 years. Rosen, 63, is a certified public accountant who has two master’s degrees along with a JD he earned in 2001. He was 50 when admitted to the Illinois bar in 2003.

For the first time since independence, in a nation founded in large part on the rejection of a fixed nobility determined by birth and perpetuated by inheritance, America is paving the way for the creation of dynastic family wealth. Abolition or evisceration of the Rule Against Perpetuities in over half the states along with the likely repeal of the federal estate tax mean that there soon will be no obstacles to creating large pools of wealth that will insure lavish incomes to lucky heirs for generations without end.

The timing of these legal changes could hardly be worse. Marshaling innovative economic data extending back centuries, Thomas Picketty convincingly argues that the relatively egalitarian incomes enjoyed in developed economies from the end of World War II until around 1980 were an aberration and that we are in the process of returning to the historical norm of much greater income and wealth inequality. The driving force is the return to a world in which the rate of return to capital (r) exceeds the growth rate of national income (g) — another historical norm temporarily abrogated during the 20th century. The wealthy hold an extremely high fraction of national wealth, and when returns to that wealth exceed the growth rate of national income, their relative economic power (and all that goes with that) increases proportionally.

In many ways, Richard Nixon’s story is as American as The Great Gatsby — or so writes John Farrell in his recent article for Politico Magazine. He came from humble beginnings, pursued a dream beyond his rank in life and harbored great ambition fueled by the “laughs and slights and snubs” that he grew to expect from the moneyed political class. But even once secure in the Oval Office, Nixon, who died 20 years ago this week, was perpetually uncomfortable in the limelight, with a staff that struggled tirelessly to humanize him for public consumption. It was a challenge, and it inspired some of the most strained photo ops in the history of the American presidency. ... This photo of President Nixon walking on the beach in black wing-tipped shoes came to symbolize Nixon’s awkwardness. He once explained his fondness for formalwear to Bob Greene, the author of Fraternity: A Journey in Search of Five Presidents. “It isn’t a case of trying to be formal,” Nixon told Greene. “But I’m more comfortable that way … I’m always wearing a coat and tie. Even when I’m alone. If I were to take it off, probably I would catch cold. That’s the way it is.”

I had my Richard Nixon moment yesterday, as I agreed to be photographed at Paradise Cove in Malibu for the forthcoling issue of our Pepperdine Law magazine. The photographer insisted that I wear a suit to the beach, and then asked me to pose in the sand, ala Richard Nixon.

The IRS does not have an easy job. Remember, it's NOT the "IRS Code" because the IRS is just the agency stuck with the task of carrying out the will of Congress. And the IRS must do this job all while being a political soccer ball — and since the mid-1990's the Republican team has hogged that ball, kicking with more enthusiasm than enlightenment. So it was nice to see a positive story about tax administration picked up by USA Today, especially because USA stories also appear in little town newspapers, like the one I read here in Lubbock, Texas (the Lubbock Avalanche-Journal: IRS: Public-private Crackdown Slashes Identity Theft, Tax Refund Fraud, the story comes from a press release by the IRS that explained:

Policymakers at the state and local level are increasingly interested in using market-based pricing mechanisms as regulatory tools. At the state level, Massachusetts, Rhode Island, and Washington have recently considered state-level carbon pricing, while California is moving forward with its own cap-and-trade program. At the local level, municipal governments are increasingly turning to stormwater remediation fees to pay for the treatment of municipal runoff required by the Clean Water Act. And Philadelphia, Berkeley, and Seattle all recently joined Chicago and impose a soda tax on high-caloric beverages.

The practice of tuition discounting — providing institutional aid to select students to offset the price of attending a college or university — is widespread in higher education, and its use has increased over the past few decades. NACUBO annually collects tuition discount rates and other data related to discounting among undergraduates at private nonprofit institutions, but very little is known about discounting practices at law schools or other graduate/professional programs.

The 2016 NACUBO/AccessLex Tuition Discounting Study of Private Law Schools was commissioned by AccessLex Institute in part to provide more recent information on tuition discounting practices at law schools, and to measure the effects of discounting on law schools’ finances. The use of institutional grant aid to attract and retain law students has become even more important, as many programs have had to grapple with declines in their numbers of applicants and enrollments. This challenging context has prompted law schools to implement a variety of practices and policies to raise their enrollments, including increasing their financial aid expenditures.

Congressional Republicans and Trump administration officials have said that they plan to repeal the deduction for nonbusiness state and local taxes (SALT) as part of a comprehensive tax reform package. This essay critically examines the major arguments for repealing the SALT deduction. Repealing the deduction and using the resulting revenues to reduce federal rates across the board would likely lead to greater tax-induced deadweight loss overall. Repealing the deduction also would distort decisions about the financing of education and health care, which together account for more than half of all state and local government spending. Repeal would further encourage a shift from nonbusiness to business taxes at the state and local level, and potentially would result in more borrowing by subnational governments in the short and medium term. It would have ambiguous effects on the progressivity of the overall tax system, and it would exacerbate existing differences in federal tax burdens across states.

The House on Thursday narrowly approved a budget blueprint that Republican leaders and President Trump hope to use as a legislative vehicle to cut taxes. Very wealthy American families will be the biggest beneficiaries of these cuts while many in the upper middle class could actually see their taxes go up.

While Republicans still have not produced a detailed proposal, a tax framework they published last month and their public comments make clear that they are doing everything they can to enrich the 1 percent — a group that would receive 80 percent of the benefits, according to the Urban-Brookings Tax Policy Center.

One change is getting a lot of attention: Republican leaders want to eliminate the state and local tax deduction. This would hurt many Americans, especially those who live in states like California and New York with high state and local taxes.

The married taxpayers in Partyka v. Commissioner, T.C. Sum. Op. 2017-79 (Oct. 25, 2017), fell prey to scammers who scheme was to rent a furnished house and then steal the furnishing. The scammers stole a substantial amount of household furnishings from the taxpayers and the taxpayer pegged the value of the stolen items at just under $30,000 for which they claimed a §165 loss deduction.

There was an interesting timing issue in the case, but what struck me was the long discussion of substantiation, and how what may be sufficient documentation of loss for one purpose (police investigation, prosecution) may not be enough for tax purposes. Indeed, the Tax Court found that the taxpayers were potentially liable for the §6662 accuracy-related penalty. I question, however, whether the Tax Court properly applied the Cohan rule. For details, see below the fold.

The major tax policy challenge of the 21st century is the need to address the nation’s fiscal condition fairly and in a manner conducive to economic growth. But since California adopted Proposition 13 nearly forty years ago, antipathy to taxes has served as the glue that has held the Republican coalition together. Even though our taxes as a percentage of our economy are low by OECD standards and low by our own historical experience, anti-tax attitudes have become even more important for Republicans politically, since they now find it hard to agree on almost anything else. So revenue-positive, or even revenue-neutral, forms of tax reform — at least as long as the GOP maintains its legislative majority — are politically impossible.

A Catholic student group at Georgetown University that promotes the benefits of traditional marriage risks losing its funding and other university benefits after being accused of fostering hatred and intolerance.

Love Saxa advocates for marriage as “a monogamous and permanent union between a man and a woman,” the group states in its constitution. [Georgetown's motto is Hoya Saxa ("What Rocks").] That definition of marriage happens to be in line with that espoused by the Catholic Church, raising the question of how administrators at Georgetown, the United States’ oldest Catholic and Jesuit institution of higher learning, will handle the controversy if it eventually comes before them.

“I suppose the question for Georgetown is whether they think Catholic kids can still be Catholic there,” said Chad Pecknold, a theology professor at the Catholic University of America. ...

The University of Arkansas system is considering proposed changes in its tenure policy that could make it easier to fire professors and, faculty members say, chip away at academic freedom.

A key concern, they say, is language in the proposal that outlines when professors may be fired for cause. It includes a "pattern of disruptive conduct or unwillingness to work productively with colleagues." That language, some faculty members say, effectively means collegiality — or the lack thereof — can be used as a reason to dismiss a professor.

Using collegiality as a criterion to evaluate faculty members has long been condemned by the American Association of University Professors.

In this study, we explore what factors predict student decisions to enroll at law schools and how the probability of enrollment varies across students with various profiles and conditions. To find the predictors of enrollment and differences in the probability of enrollment across groups, we employ a logistic regression model using the institutional data obtained from one of the top-ranked law schools in the nation. After estimating the logistic regression model, the probabilities of enrollment are calculated for students with specific profiles and conditions based on the coefficients generated by the logistic regression analysis. The findings reveal many factors that are associated with the probability of enrollment at this law school. Particularly, students with higher academic qualifications, underrepresented minority status, the most selective undergraduate school, STEM background, and previous applicant status have a lower probability of enrollment compared to their respective counterparts.

The Unified Framework for Fixing Our Broken Tax Code (the “Big Six” tax plan) would revise business and individual taxes. Most significantly, on the business side, the Big Six tax plan would lower the corporate income tax rate from 35 percent to 20 percent, which would reduce corporate taxes by an average of $200 billion a year, or $2 trillion over the 10-year budget window. However, in the short run, a surprisingly large portion of this relief would end up in the pockets of foreign investors.

On October 19th the Tax Court was in Lubbock in the person of Chief Judge Paige Marvel. The Court’s involvement with the ABA Tax Section is well known, but I did want to give a shout-out to its equally important involvement with legal education. Each year the tax faculty at Tech Law (myself, Alyson Outenreath, Steve Black, Vaughn James, and Terri Morgeson) hold a Tax Careers Panel at the Law School (graciously sponsored in recent by the Texas State Bar Tax Section). We always time it so that we can invite the Tax Court Judge to be on the panel. We are delighted that every judge has participated.

At this year’s symposium, panelists will consider the merits of origin-based versus destination-based systems as well as the merits of income versus cashflow taxes. Discussion about various reform options will encompass theoretical fundamentals, likely tax planning responses, administrability, and tax treaty compatibility.

How could a libertarian view—which generally believes in limited redistribution and limited government—ever support a basic income program (UBI), which redistributes tax revenues to the public through unconditional cash grants?

In their new work, Miranda Perry Fleischer and Daniel Hemel undertake a careful analysis of libertarian thought to identify the libertarian case for a UBI. The work first identifies the particular strains of libertarianism that would sanction a UBI. In particular, the authors argue that provision for a minimal level of material well-being is consistent with both minimal state libertarianism (for example, of Robert Nozick) as well as classical liberalism (for example, of Milton Friedman). Furthermore, libertarians would generally favor cash over in-kind transfers, since the former preserve individual autonomy and choice. The authors proceed to consider specific design choices for a UBI program from a libertarian perspective, and argue that a libertarian would prefer a grant that is not tied to work effort (due to a skepticism for state capacity to determine earning capacity) and would prefer an annual to a lump sum grant (since the latter will pay too much, or too little, depending on the recipient’s lifespan).

Following up on previous posts (links below): President Trump has named David Kautter, Assistant Secretary of the Treasury for Tax Policy. to be the Acting Commissioner of the IRS when John Koskinen's term ends November 12.

A proposal to tighten up bar passage requirements for ABA-accredited schools, which the House of Delegates rejected in February, will be revisited in November by the council of the Section of Legal Education and Admissions to the Bar.

A wave of corporate inversions by U.S. firms over the past two decades has generated substantial debate in academic, business, and policy circles. The core of the debate hinges on a couple of key economic questions: Do U.S. tax laws disadvantage U.S.-domiciled companies relative to their foreign competitors? And, if so, do inversions improve the competitiveness of U.S. multinational firms both abroad and at home?

The Trump administration on Thursday said it has agreed to pay between $1 million and $10 million to settle lawsuits against the Internal Revenue Service for targeting tea-party groups in the Obama era, saying in court documents that the IRS “admits that its treatment...was wrong.”

The Justice Department entered into proposed settlements with groups that alleged in 2013 they had been subject to discriminatory treatment in applying for tax-exempt status. The move largely puts an end to a saga that had engulfed the IRS for years.

In a settlement filed in federal court in Washington, which still must be approved by a judge, the Justice Department said the IRS “expresses its sincere apology” and was “fully committed” to not subjecting groups for additional review “solely on the name or policy positions of such entity.”

The most common underpinning of economic analysis of the law has long been the goal of efficiency (i.e., choosing policies that maximize people’s willingness to pay), as reflected in economic analysis of administrative rulemaking, judicial rules, and proposed legislation. Current thinking is divided on the question whether efficient policies are biased against the poor, which is remarkable given the question’s fundamental nature. Some say yes; others, no.

I show that both views are supportable and that the correct answer depends upon the political and economic context and upon the definition of neutrality.

This two-volume set offers an in-depth analysis of the leading tax treaty disputes in the G20 and beyond within the first century of international tax law. Including country-by-country and thematic analyses, the study is structured around a novel global taxonomy of tax treaty disputes and includes an unprecedented dataset with over 1500 leading tax treaty cases. By adopting a contextual approach the local expertise of the contributors allows for a thorough and transparent analysis. This set is an important reference tool for anyone implementing or studying international tax regulations and will facilitate the work of courts, tax administrations and practitioners around the world. It is designed to complement model conventions such as the OECD Model Tax Convention on Income and on Capital. Together with Resolving Transfer Pricing Disputes (2012), it is a comprehensive addition to current debate on the international tax law regime.

Sometimes modest changes spark huge debates. That has been the case with the decision by some law schools, led by the University of Arizona, to accept the Graduate Record Exam (GRE) as an additional basis for law school admissions.

The openness to innovation at U.S. law schools has been spurred by the changing legal market and the dramatic downturn in applications for JD programs since 2010. But the addition of the GRE would have been a good idea at any time. For many decades, virtually every applicant to a U.S. JD program was required to take the Law School Admissions Test, or LSAT.

Earlier this year, John Grisham announced that his next legal thriller would be about the scams behind many for-profit law schools. But it’s a long leap from subject matter to story, and Grisham’s newly reanimated storytelling skills are what make “The Rooster Bar” such a treat. ...

He begins by describing the sleaziest for-profit law school he can imagine. Foggy Bottom Law School advertises the ease with which its happy graduates land high-paying jobs at prestigious firms, but this book’s three main characters — Mark, Todd and Zola — are not happy. Halfway through their final year at school, they have wised up to the only real attainment Foggy Bottom has earned them: A mountain of debt. ...

Always helpful to his readers, Grisham lays out the basics simply, including this list: “(1) FBLS was a subpar law school that (2) made too many promises, and (3) charged too much money, and (4) encouraged too much debt while (5) admitting a lot of mediocre students who really had no business in law school, and (6) were either not properly prepared for the bar exam or (7) too dumb to pass it.” ...

Morrissey v. United States (11th Cir. Sept. 25, 2017) creates new uncertainty regarding “medical” expense tax deductions for various types of fertility treatment costs. Internal Revenue Code § 213(a) allows taxpayers to deduct the costs of “medical care” above a certain threshold. Section 213(d) defines the term “medical care” to include amounts paid “for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body of the taxpayer, his spouse, or dependent.”

Fertility treatment costs include the costs of diagnostic tests and medical treatment performed on the “body” of “the taxpayer, or his spouse.” The most common assisted reproductive technologies (ARTs) are:

Over the past year, Wayne State University officials have been taking the rare step of trying to strip tenure from five medical-school professors. The transcript from one former professor’s hearing offers an inside view into how that process plays out.

Administrators argue the faculty members in question haven’t been doing their jobs well for years and are therefore abusing their tenure. Faculty union representatives dispute that, and argue that the attempt to revoke tenure is a result of a perverse shift in priorities among the university’s leadership. According to union leaders, M. Roy Wilson, the president, and several senior administrators drastically ramped up the pressure on medical-school faculty members to bring in outside grant funding a couple of years ago. Officials then deemed those who fell short "unproductive" and began trying to dismiss some of them.

Union leaders say such an approach undermines academic freedom. But Mr. Wilson told The Chronicle that at most medical schools there’s an expectation that professors earn at least part of their salary by generating grants. He added that the academic-freedom argument was "nonsense." "In my view, we risk further eroding the public trust in higher ed if we continue to protect and pay tenured professors who check out and stop working," he said.

Now that we are deep into the fall semester, it's time to think about SEALS 2018! The conference will be held August 6-12, 2018 in Fort Lauderdale, Florida. The conference submission tool is now open, and I am eager to coordinate people who are interested in presenting tax work at the SEALS conference into relevant panel groups. In addition, we have also had a very successful Tax Policy Discussion Group in recent years.

The subject of taxpayer rights is receiving increasing attention worldwide. Tax scholars, practitioners, and administrators are grappling with the challenges of delivering on the promise of taxpayer rights, the benefits of success, and the price of failure. Nevertheless, a fundamental question has escaped pointed examination: What does the concept of taxpayer rights offer?

In this paper we suggest an answer to that question. Our focus is the U.S. Taxpayer Bill of Rights (TBOR).

The American family is changing. Individuals marry later, divorce more frequently, or live together without being married (cohabit). Non-marital births, complex custody arrangements, and multiple generations of families living together are more common, but the tax system has not kept pace. Although tax benefits are an important pillar of support for children, understanding who in a complex family should claim them can be difficult. We document demographic trends and explain their importance with respect to tax filing and eligibility for child related benefits such as the earned income tax credit, child tax credit, dependent exemption and others.

We're at that time of year - the fall law review placement season, the FRC and hiring, tenure applications and review - when the question of the value of the placement of an article in a particular journal raises its questionably meaningful head.

The point I am raising here is related to but somewhat different than that made by Paul in his 2006 essay, The Long Tail of Legal Scholarship. That was about the top-end loading of citations. Along the lines of the 20-80 principle, not only do 20% of the articles account for 80% of the citations (in concept), but the tail of seldom or never cited work stretches out a long, long way. I add to it something I observed about US News "peer assessment" rankings around the same time: the rankings masked the underlying distribution curve under which the ordinal rankings were significantly less meaningful once you got beyond the very top ranked schools (and apart from all the other issues with the meaningfulness of those rankings).

Somebody in my hearing raised the question of the relative value of a law review article placement based on the Washington & Lee law school library's ranking system. So I took a closer look at it.

I try to teach my students to think of law as a slow-moving conversation between the various sources of law: courts, legislatures, agencies. In particular, I encourage them to focus on trial court opinions when they seek to understand a particular area of law because trial courts are in conversation with the particular Court of Appeals that will review them. So trial courts tend to give very thorough explanations of their decisions when they believe the decision addresses an important point of law that will probably be the subject of Appellate review. True, their conversation with their supervising court is kind of one way in that trial courts are bound the decisions made by their supervising Courts of Appeals.

In performing its trial court function the Tax Court is unlike any other trial court in the United States because its decisions are potentially reviewable by every single one of the 12 geographic federal Courts of Appeals. In effect, it has 12 supervising courts. Brutal. 12 Bosses??

That brutal fact creates a problem. What should the Tax Court do when one Court of Appeals reverses the Tax Court on a legal issue and then the legal issue comes up again? This opinion by Judge Gustafson is a beautiful illustration of the Tax Court’s answer, an answer that may surprise you, even if you think you know the Golsen rule. To learn the one weird trick the Tax Court uses, I invite you to dive beneath the fold. Gee, I hope that click-bait works.

A vast amount of tax literature appeals to the premise that a system of taxation should assign tax burdens according to taxpayers’ “ability to pay.” Despite the broad-based assent to the importance of “ability to pay,” however, there has been far from a consensus on why it is important, or even on what the term means. These confusions are frequently overlooked, though, because many of the characterizations of and justifications for “ability to pay” come out the same way on various issues — thus masking the differences among the viewpoints. In this Article, I attempt to unpack and shed much-needed light on the term “ability to pay.”

What could be better than watching the Dodgers beat the Astros last night in Game 1 of the World Series? Watching it with Michael Luwoye, who is playing Alexander Hamilton in the Los Angeles production of Hamilton! Thanks to Mark Hiepler, co-chair of our board of visitors, for his generosity in sharing a special night with several Pepperdine faculty, staff, students, and alumni.

The only other time I attended a World Series game was in 1967, when my father somehow got one ticket to Game 6 and drove me to Fenway park and walked me to the gate as a scared and excited 10 year old. I watched the Red Sox win 8-4 while he waited in a bar across the street and drove me home after the game. I wish I could have returned the favor last night (he died in 2007, and I miss him more each passing year).

Although many politicians suggest that the primary purpose of any tax reform should be cutting taxes and achieving simplicity, the main problems of our tax system do not stem from either lack of simplicity or over-taxation. They have to do with provisions that have outlived their purpose, such as the various permanent subsidies in the tax code for fossil fuels, in an era of extraordinary climate change, and the privileged rate for capital gains, in an era of increasing inequality from tax loopholes and subsidies available to the wealthy. Much of the treatment of intellectual property (IP) requires updating, and this article evaluates the suggestions of a number of key academic and practitioner commentators that appeared in law review articles over the last year, looking at proposals for a new capitalization scheme, taxation of virtual economies, rethinking corporate restructurings, and ways to achieve innovation without permitting the kind of IP profit shifting that has driven offshoring of profits.

Conservatives have been seething since 2013 over what they say was an unfair and imbalanced effort by the IRS to scrutinize right-leaning organizations more closely than other groups seeking nonprofit status.

As a new report from the Treasury Department’s inspector general for tax administration shows, the IRS did flag some conservative groups out of concern that they might be problematic. But it also paid the same kind of extra attention to liberal organizations with words like “occupy” and “progressive” in their names between 2004 and 2013.

So it’s now official. There was extra scrutiny but there was no liberal bias among the federal employees who determine whether new organizations that want to operate as nonprofits are legitimate – and therefore eligible for the tax-exempt status that goes with that designation.

As a former IRS lawyer who now researches nonprofit regulation, I am relieved to see the claim that the government exclusively targeted conservative organizations officially debunked. I believe this new report ought to usher in a serious discussion about a very real problem: The IRS is too cash-strapped to conduct its oversight of nonprofits of all kinds. ...

The Government Accountability Office, a nonpartisan congressional agency, recognized in 2014 that the tax agency’s budget and staff were too small to handle its nonprofit oversight responsibilities. The situation has only deteriorated since then.

The overall IRS budget fell by about 18 percent in inflation-adjusted terms from 2010 to 2017, from US$14 billion to roughly $11.5 billion. Today, the agency employs fewer people than it did in 2010. The number of its employees dedicated to auditing and vetting the nonprofit sector fell about 5 percent from 2010 to 2013, the GAO found.

This long-term trend, which began two decades ago, has eroded oversight. The number of aspiring nonprofits gaining tax-exempt status rose over the past decade as rejections fell. The number of denials plummeted from 1,607 in 2007 to merely 37 in 2016.

How does the income tax shape the boundaries of the firm? This Article goes back to foundational ground — Coase’s inquiry into the nature of the firm— to gain some traction on this elementary question. ...

Part II revisits the literature on Coase and the boundaries of the firm, setting the stage for a discussion of how transaction cost economics can inform tax policy. Part III explores some of the ways in which the income tax distorts the boundary of the firm. In doing so, it provides numerous examples of provisions that can grow or shrink firms at the margin or alter the relative size of their components. It also discusses how firms can respond to income tax law incentives without significantly changing their economic behavior by engaging in regulatory arbitrage.

Disability insurance take-up has expanded substantially in the past twenty years in the United States while shrinking in Canada. We empirically assess these trends by measuring the strength of the ‘push’ from weak labor markets versus the ‘pull’ of more generous benefits.

Governments can use regulation to pay for public goods out of the pockets of consumers, rather than taxpayers. For example, the Affordable Care Act underwrites care for women and the infirm through higher insurance premium payments by healthy men. Building on a classic article from Richard Posner, we show that these “cross-subsidies” between consumers are a common feature of modern law, ranging from telecommunications to intellectual property to employee benefits.